Currency and Economy News

Welcome to MoneyTransferComparion’s economy and currency news section. Our expert economist will be happy to provide you with a free overview of the most interesting things that happened last week in the world of currencies, as well as a prediction for next week’s happenings.

This section is slightly technical. If you need any assistance on international money transfer and how they work please view our FAQ. If you want to understand the basic concept behind how events impact currencies go here, Trade Account is explained here, technical analysis here, and we have also created top list events in history that impacted currencies for your pleasure.

 

In Depth Commentary on Current Events

  1. Our Brexit Survey March 24 – Read for Brexit prediction, by the people and by our experts.
  2. Our UK economy forecast with Boris Johnson as PM
  3. Our “the demise of the pound” series – against the Euro and against the U.S Dollar

Analysis and Prediction:

Date of publication: January 13, 2020 | Author: Tim Clayton

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Last Week’s Summary

World Economic News Review

US-Iran fears ease

After a brief recovery following the initial US strike against Iran Commander Soleimani, fear increased once again following reports that Iran had targeted missile strikes on US forces based in Iraqi airbases. There was a fresh surge in demand for the Japanese yen and oil prices surged.

Tensions declined quickly, however, as Iran suggested that the immediate retaliation phase had ended while the US indicated no further action at this stage. Although underlying tensions remained high, an easing of fear was the dominant market factor.

Risk appetite recovered and there was a dip in demand for defensive assets such as the Japanese yen and gold. Oil prices also reversed gains to trade sharply lower on the week. 

Trade signing on track

Comments from US and Chinese officials indicated that a signing of the US-China trade deal was still on track for January 15th which helped underpin global risk sentiment to some extent. 

US 

The ADP employment report registered an increase in private-sector payrolls of 202,000 for December, above market expectations of 160,000

The December non-farm payrolls increase, however, was below consensus forecasts of 165,000 at 145,000 and there was a small downward revision to November to 256,000 from the 266,000 reported previously. Unemployment held at 3.5%, in line with expectations, while average hourly earnings increased 0.1% which cut annual growth to 2.9% from 3.1%. 

The data overall was weaker than expected and the slowdown in wages growth will maintain expectations of subdued inflation pressures. 

Overall, there were strong expectations that the Federal Reserve would hold interest rates steady in the short term. Evidence of low inflation pressures will certainty keep any increase in rates off the agenda in the short term.

Elsewhere, the ISM business survey for services improved for December which offset weak manufacturing data released the previous week.

UK

There was further choppy Sterling trading during the week. The UK currency was undermined by cautious remarks from Bank of England Governor Carney who suggested that a cut in interest rates was a possibility given that the bank’s expectations of a stronger economy this year was no assured

Two other Bank of England members also suggested that they would support an interest rate cut if there is no near-term improvement in economic data which capped potential Sterling support.

In contrast, business surveys offered some encouragement with indications that confidence had increased notably following the General Election as uncertainty eased. If there is evidence of recovery, a rate cut is likely to be taken off the table.

Euro-zone

Euro-zone economic data had little impact with the headline and core inflation rates at 1.3%. There was no shift in expectations of very low interest rates which limited Euro support, although hopes for a recovery this year did push German yields higher during the week.

International

Canadian employment increased over 35,000 for December following the shock decline of over 70,000 the previous month. Bank of Canada Governor Poloz was also relatively optimistic and the Canadian dollar recovered from 2-week lows.

The Australian dollar was undermined by fears that the economy would be damaged by extensive and destructive wildfires. Stronger data releases provided an element of relief later in the week with a recovery from 3-week lows.

Next Week’s Forecast & Events

a Men Looking at Economic Forecast

Trade deal should be signed

The phase-one trade deal between the US and China is due to be signed on January 15th with a 10-strong delegation from China travelling to Washington. Assuming there is no last-minute hitch, signing of the deal should help underpin risk appetite, although the impact is likely to be limited, especially with expectations that there will be little progress towards the second phase of talks.

Middle East tensions could still be important

At this stage, there is optimism that there will be no further US military strikes on Iranian targets with immediate tensions remaining lower. Markets will still be monitoring developments closely, but defensive yen demand is likely to remain weaker. 

US

The latest CPI data is due on Tuesday with a limited increase in prices expected for the month while the latest retail sales release is due on Thursday. Unless prices rise much more than expected, the impact is likely to be limited with the Federal Reserve not looking to change interest rates in the short term. 

Strong data would, however, trigger a further dip in expectations that rates could be cut during the year ahead. 

Latest regional business surveys will also be an important element.

UK

Industrial production and GDP data is due on Monday while the latest inflation data will be released on Wednesday and retail sales data on Friday.

The data will be monitored closely, especially with Bank of policy-makers hinting that interest rates could be cut relatively soon if there is no improvement in the forthcoming data releases.

Low inflation would make it easier for the central bank to consider cutting interest rates.

Comments from Bank of England officials will also be an important focus during the week.

Euro-zone

The latest ECB minutes from December’s meeting are due for release on Thursday. Markets will be looking for any evidence of support for a change in the inflation target. Any shift towards a higher target would tend to undermine the Euro over the medium term.

German business confidence will also be a significant element during the week.

International

The Bank of Canada business outlook survey will be released on Monday and this survey does have an important impact on central bank policy. A robust set of readings would dampen expectations of any cut in interest rates.

New Zealand business confidence data is due for release on Tuesday local time and will also have a significant impact on currency sentiment.

Chinese industrial production and retail sales data is due on Friday with markets expecting a slight slowdown from the previous month.

Currency Forecast for Next Week

Currency pairSpot 1-week forecast1-month forecast
EUR/USD1.1121.1151.122
USD/JPY109.5110.0108.7
EUR/GBP0.8530.8500.839
GBP/EUR1.1721.1761.192
GBP/USD1.3041.3121.337
AUD/USD0.6900.6920.702
USD/CAD1.3061.2951.292
USD/SGD1.3491.3491.346
USD/HKD7.7707.7807.790
NZD/USD0.6660.6800.675
GBP/JPY143.7144.3145.4
GBP/AUD1.8891.8961.905
GBP/NZD1.9571.9291.981
GBP/SGD1.7591.7701.800
GBP/HKD10.1310.2110.42
GBP/CHF1.2681.2761.305
 timTim Clayton is a market analyst with more than 20 years of experience in the financial markets, with particular focus on currencies. Holds an economics degree from University of New York. Writes for multiple publications including Investing.com and SeekingAlpha so he is on top of all the happening in the world of currencies and macro-economics. 


Information expressed in this article and on MoneyTransferComparison.com as a whole does not constitute as financial advice. If you decide to make any actions based on the information you read, we shall not be held responsible.

 

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